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Asymmetric effects of third-country exchange rate risk: A Markov switching approach

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  • Yamaka, Woraphon
  • Zhang, Xuefeng
  • Maneejuk, Paravee
  • Ramos, Vicente

Abstract

The standard tourism demand models consider the effects of the bilateral real exchange rate between origin and destination in a linear context. Our study contributes to the literature by incorporating the asymmetric effects of real exchange rate volatility of home and third-countries. We propose a Markov Switching ARDL model to estimate outbound tourism demand over the period of 2002–2019. This model allows us to examine both the short- and long-run effects in the likely presence of asymmetric effects and structural breaks. The results reveal that there are nonlinear asymmetric long- and short-run effects of the third-countries exchange rate volatility. We also identify relevant structural changes coinciding with major events.

Suggested Citation

  • Yamaka, Woraphon & Zhang, Xuefeng & Maneejuk, Paravee & Ramos, Vicente, 2023. "Asymmetric effects of third-country exchange rate risk: A Markov switching approach," Annals of Tourism Research, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:anture:v:103:y:2023:i:c:s0160738323001494
    DOI: 10.1016/j.annals.2023.103676
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